KARACHI: Pakistan Tax Bar Association (PTBA) has suggested the Federal Board of Revenue (FBR) to outsource the preparation of profiling potential taxpayers to a data mining company for broadening of tax base.
The PTBA in its tax proposals for budget 2019/2020 suggested the tax machinery that the assignment of preparation of profile of potential taxpayers/registered person be out sourced to a data mining company in line with the responsibility of collection of tax on capital gains given to the National Clearing Company of Pakistan.
“This company should only be allowed to collect the following information and present the potential taxpayer’s profile to the FBR’s BTB department to take appropriate action in accordance with law.”
The PTBA said that Pakistan was facing a challenge with regards to the widening of the current tax base to prevent tax-revenue erosion.
Although in the current year number of Active Taxpayer has improved; however since many years, Pakistan’s registered tax base has been more or less stable at less than 1 percent of the total population.
Over the last few years, the concept of filers and non-filers has been introduced in order to encourage increased filing of returns of income.
However, such amendments have not been able to increase the tax base by many folds as envisaged.
On the other hand has increased the burden of withholding agents by prescribing different withholding rates based on the Active Taxpayers List without achieving any significant progress inroads on the actual tax compliance rates.
In reality bulk of the increased cost due to higher tax rates for non-filer, has been passed on by the unregistered persons to the end consumer by enhancing cost of goods /services to gross up the impact of higher withholding.
The PTBA also proposed that a new team comprising of young IT expert, Accountants and Tax experts should be hired for BTB department.
A task force comprising of independent professionals and top officials be formed to monitor the work assigned to the data mining company and ensure that the BTB department operates efficiently and effectively to ensure the progress in broadening of tax base activity by FBR.
The effective enforcement should be made in accordance with Section 114 of the ITO. The government and FBR on its part should ensure that the relevant provisions of law are implemented in letter and spirit without any distinction on the basis of cast, creed, color and clout to achieve the goal of broadening the tax base.
A complete profile consisting of CNIC, Firm/Company registration-wise of the taxpayer may be prepared generated by maintaining a data base of all the:-
Owners and holders/allottee of the industrial, commercial, residential and agriculture properties;
Private motor vehicles;
investment in bank deposits;
Investment in national saving schemes;
investments in Capital Market; and
Major expenditure (i.e. Rs.300,000/- & above) incurred on account of hospitalization, parties at hotels and schooling of dependents.
Submission of quarterly statements by the Registrars & Housing Societies for registration/transfer of Immovable Property (Industrial Commercial, Residential & Agricultural), Motor Vehicle Registration Authorities, Clubs (Private & Public), Credit Card issuing authorities, Central Depository Company, National Clearing Company of Pakistan, large scale private hospitals, hotels & schools and Financial Institutions distributing profit more than statutory taxable limit or granted commercial loans, should be made mandatory.
Jurisdiction other than Company should, for some time, be reverted strictly to geographical basis to avoid duplication and slippages of potential tax filers.
Tax credit at the rate of 5% be restored and provided to those taxpayers whose 90% Sales and Purchase of Goods are from persons who are registered as Sales Tax and Income Tax taxpayers.
The PTBA said that the proposed amendments would result in increased visibility of potential taxpayers and incentivize registration with the tax authorities without increasing the burden on existing taxpayers.